All Forum Posts by: Elliot Rivera

Do you know what the economic occupancy rate is? If the leases are month to month? Do you need the $3,575/month or do you have the capital reserves to meet holding costs during renovation?

I have acquired and renovated quads assuming the property vacant and keeping the tenants while renovating at time of turnover. I can tell you after doing both, we prefer assuming the property vacant, renovating and then stabilizing.

In which case rent rolls would not matter, your decision would be based primarily on ARV and the market rents you will achieve post renovation.

Rent rolls would matter far more for a commercial property or for a somewhat turn key property where there was not significant deferred maintenance. 

I am in the middle or a portfolio cash out refinance so I would concur with Charles. There are banks that will lend in this environment if you are willing to put in the leg work to find them. We called more than 50 banks before settling on a Credit Union with the terms we were looking for. 

Yes. Very much so.

@Jenn Barona we are familiar with the neighborhood and our opinion differs. The local Government has invested in the infrastructure immediately neighboring this subdivision (streets, commercial expansion) and new local business is on the rise in the surrounding area. While existing large employers sit on either side if Tower road. The assigned schools are highly rated and there are affluent communities in close proximity.

Other investors have achieved similar outcomes in this subdivision, hence our investment. We are out of town investors so we do utilize local property management companies. But I lived in Gainesville for some time so I am fluent in the communities. There are certainly some I would not invest in but this was not one of them.

This is half of the battle, being able to see diamonds while others see coal.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Gainesville.

Purchase price: $210,000
Cash invested: $40,000

Duplex in Gainesville, Buy & Hold Renovation

What made you interested in investing in this type of deal?

Duplex close to the University offered for sale for first time in 30 years. Large units and great location.

How did you find this deal and how did you negotiate it?

My realtor sent me, it was her listing. Property was listed at $240k but after reviewing the work that needed to be done and crunching the estimated rents we came to terms at $210k.

How did you finance this deal?

Conventional Financing.

How did you add value to the deal?

Renovated the larger units bathrooms and changed the fixtures. Painted all of the interior, cleaned up landscaping, added gutters to prevent siding damage.

What was the outcome?

Gross rent amounts are $2,650 now and after debt service/expenses the property cash flows very well. Winning project.

Lessons learned? Challenges?

This was the property where after completion we decided to begin project managing the subs versus using a GC. The GCs we have used are very good, however, we felt that we could manage the project faster with potential savings. As a firm we have had success doing this on the latest acquisitions.

@Deb S. I appreciate that. Our normal practice is to have an inspection done on the property. However, that is done mainly for major issues (foundation, roof, HVACs etc). We know going in (for the properties we favor) that it will be "x" per sq foot for flooring, paint, etc.  - and more often than not we will have a strong gauge of an "all in" figure for a certain size sq foot unit and BR/BA combination. Mainly the repair cost estimates come from experience. We work with the same subs so we know where their bid is going to land. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Gainesville.

Purchase price: $257,500
Cash invested: $103,000

This project was a bear. Originally the property did not appraise (the first lender used an out of area appraiser and the comparable properties were not true comps). So at the 11th hour we had to move through a new broker and get approved and run another appraisal. Which came back appropriate. We then proceeded to fully renovate the interiors of all the units. We asked that the seller leave all units vacant in order to shorten the renovation timeline. Side note; the roof was replaced as part of the contract so one less thing to worry about. We replaced all flooring, painted all interiors, replaced all outlet plugs and covers, new light fixtures, fans in living rooms and bedrooms, re-faced kitchen cabinetry and countertops, refinished all bathroom tile/tubs, re-faced bathroom vanities, replaced shower fixtures and overhead hood vents. A few curveballs: we managed this project ourselves due to the budget. Only issue we had regarding the management of the project was with the handyman portion of the job as he was slow and the work was not up to par(he had to redo tile and several fixtures). We also ended up replacing an AC unit that was unexpected and re-plumbing the washer hookup box due to a leak. But that kind of thing is the norm when renovating units. Expect and budget for it!

What made you interested in investing in this type of deal?

The opportunity. Previous owners were not experienced landlords and as a result the property became distressed. Significant deferred maintenance and lower than market rents.

How did you find this deal and how did you negotiate it?

Property fell out of escrow at higher price due to appraisal. Our team was able to increase down payment whereas other buyer could not. Asking price was $279k we agreed to $257,500.

How did you finance this deal?

Conventional Financing.

How did you add value to the deal?

$50k estimated budget to completely renovate interiors of all units.

What was the outcome?

Former rents were between $550-$600/month. After renovation units were rented at $900/monthly. 18% cash on cash return.

Lessons learned? Challenges?

Tried to get cheap and replaced all appliances with used versions from local vendor. Tons of service calls the first few months eliminated any savings we achieved. In the future we will purchase new. Not worth the hassle and money.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Gainesville.

Purchase price: $257,500
Cash invested: $103,000

This project was a bear. Originally the property did not appraise (the first lender used an out of area appraiser and the comparable properties were not true comps). So at the 11th hour we had to move through a new broker and get approved and run another appraisal. Which came back appropriate. We then proceeded to fully renovate the interiors of all the units. We asked that the seller leave all units vacant in order to shorten the renovation timeline. Side note; the roof was replaced as part of the contract so one less thing to worry about. We replaced all flooring, painted all interiors, replaced all outlet plugs and covers, new light fixtures, fans in living rooms and bedrooms, re-faced kitchen cabinetry and countertops, refinished all bathroom tile/tubs, re-faced bathroom vanities, replaced shower fixtures and overhead hood vents. A few curveballs: we managed this project ourselves due to the budget. Only issue we had regarding the management of the project was with the handyman portion of the job as he was slow and the work was not up to par(he had to redo tile and several fixtures). We also ended up replacing an AC unit that was unexpected and re-plumbing the washer hookup box due to a leak. But that kind of thing is the norm when renovating units. Expect and budget for it!

What made you interested in investing in this type of deal?

The opportunity. Previous owners were not experienced landlords and as a result the property became distressed. Significant deferred maintenance and lower than market rents.

How did you find this deal and how did you negotiate it?

Property fell out of escrow at higher price due to appraisal. Our team was able to increase down payment whereas other buyer could not. Asking price was $279k we agreed to $257,500.

How did you finance this deal?

Conventional Financing.

How did you add value to the deal?

$50k estimated budget to completely renovate interiors of all units.

What was the outcome?

Former rents were between $550-$600/month. After renovation units were rented at $900/monthly. 18% cash on cash return.

Lessons learned? Challenges?

Tried to get cheap and replaced all appliances with used versions from local vendor. Tons of service calls the first few months eliminated any savings we achieved. In the future we will purchase new. Not worth the hassle and money.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Gainesville.

Purchase price: $209,000
Cash invested: $80,000

Distressed quad purchased in up and coming neighborhood in Gainesville, FL. Renovation included new roof, windows, exterior paint, landscaping, gutters, flooring, interior paint, light fixtures, switches, kitchen remodel, bathroom remodel, washer/dryer and window coverings. In-force rents were between $550-650/month. Achieved market rents of $850-900/month per unit post reno. 15.5% cash on cash. 60 day reno timeline.

What made you interested in investing in this type of deal?

Previous experience, we have several multi-families in this market and the numbers worked on the projection.

How did you find this deal and how did you negotiate it?

Realtor we worked with presented this property. Negotiated based on deferred maintenance, current rents and comparables. Asking price was $229k after some back and forth deal closed at $209k.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Property rent rolls were significantly under market due to deferred maintenance. Plan was to renovate units cosmetically top to bottom and bring rents to market.

What was the outcome?

Month to month tenants accepted rental increase after witnessing owner investment in property (new roof, windows and paint was completed within 20 days of ownership). Vacant unit was renovated (see images) and rented within 30 days.

Lessons learned? Challenges?

Continue to expand your teams. You can never have enough handymen, electricians, carpenters in your rolodex. Project timelines can be extended if your go to service guy is booked a few weeks. Time is money!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Graciela "Dada" McGlynn is a great realtor in the North Central Florida area